Where is Your Business on the Payments Pathway?
Rome wasn’t built in a day and neither is a successful online business. Some of the most well-known companies in the digital market – Apple and Dell, for example – started small, using systems and processes suited to their size and evaluating and changing them as they grew. Taking payments is a key process to think about when doing business online and a company that is just getting off the ground has quite the journey ahead of them. Let’s take a look at the payments pathway.
PayPal is one of the world’s most well-known internet payment companies. Its popularity as an online payment method is largely due to its ease of use, affordability and the level of security it provides. It is an all-in-one service – that is, it allows you to take credit and debit card payments into a PayPal account that can then be transferred into your own bank. As such, you do not need a merchant account (a bank account that allows businesses to accept card payments) or a payment gateway (a means of authorising these payments).
PayPal is a good starting point for smaller online businesses just starting out. There is no initial outlay for the payment infrastructure and no need to produce detailed business plans, expected revenue figures, or trading history, for example. There will come a time, however, as your ecommerce business grows, when it will be worth weighing up your options. While PayPal can be more cost-effective for smaller businesses, you could stand to save a lot of money in fees by making the switch to a merchant account with a payment gateway once you reach a certain size.
While you can obtain a merchant account directly through your high-street bank (and you’ll need an additional payment solution to be able to use it), it may be a prudent step to first speak to a payments services provider (PSP) ─ many can broker the best deal for your merchant account with the most suitable acquiring bank. They can also offer competitive rates on payment gateway services, acting as a one-stop shop for the entire payments process. Make sure you choose a PSP whose gateway has an excellent uptime record with multiple payments servers ─ this vital to successful selling. High uptime means a smooth and seamless end-to-end online payment experience and a satisfied buyer who is more likely to return. Acquiring the services of a PSP will also simplify the merchant account application process and significantly speed time to acceptance – with 48 hours to approval achievable by some innovative PSPs. With merchant account and gateway in place, your ecommerce business will be ready to accept payments 24/7, 365 days per year. This, combined with the fact that you will be able to accept not only traditional credit and debit cards but alternative payment methods such as ELV and iDeal and more, means you can maximise revenue-collecting opportunities with minimal effort.
You’ve decided on your merchant account and payment gateway provider(s) – the next thing to consider is your payment page itself. Will you choose a fully hosted solution that handles card payment data (and therefore the bulk of your PCI obligations) on its own secure server or host the entire payment process on your own website?
In many ways, it will come down to whether your company has the technical know-how to pull off the self-hosted option, with all of its PCI compliance implications. Is it likely that a business that is fresh off PayPal will have this resource at its disposal? Almost certainly not. It is this writer’s opinion that a hosted payment solution from a trusted PSP is much safer, more secure, more affordable and easier to manage at this stage.
As your company grows, it may be preferable to switch to a more customisable and more measurable payment solution and it is here that the self-hosted (API – application program interface) option really shines. However, you must make sure you are compliant with the PCI DSS standard – as you will be directly handling and storing payment card information, this responsibility falls solely on you. Many PSPs offer an API solution that supports merchants that want to use their own secure servers but also wish to use the PSP’s payment network as part of their ecommerce application.
While all businesses will be at some stage of the payments pathway, the pathway itself is not set in stone. Technology is changing and evolving all the time, with exciting developments in the pipeline that will allow the compliance and security advantages of the hosted payment solution to be combined with the customisation and flexibility of the self-hosted option. We will have more on this innovation in the coming months, so keep watching this space.